Evolution of the history of Finance

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The descriptive vision of finance until the second world war
2. From the mid-1940s to the modern foundation of business finance theory.
3. Expansion and deepening of finance to this day.

1. The descriptive vision of finance until the Second World War

In the 19th century, Economic Theory advanced as an academic discipline, with the so-called classical model emerging from the hand of Adam Smith in his pioneering book «The Wealth of Nations» in 1976, where he analyzed the way in which markets organized life economic and achieved rapid economic growth, further showing that a market price system is capable of coordinating individuals and companies without the presence of a central leadership.

Until the beginning of the 19th century, in the field of finance, financial managers were dedicated to keeping accounting books or controlling their tenure, their main task being to find financing when necessary.

In 1929 the economy is immersed in an international crisis. The situation of the New York Stock Exchange was chaotic and the Economic Policy carried out contributed to aggravate the crisis, the North American and British financial groups were confronted since, when granting loans without prudence, they created an environment of solidity and non-existent instability. a rise in US interest rates that led to the paralysis of foreign loans, which produced an economic worsening in the countries that had received these loans.

In a scenario like this, companies had financing problems, bankruptcies and liquidations. This situation forced the study of finance to focus on the defensive aspects of survival, preservation of liquidity, bankruptcies, liquidations and reorganizations. The dominant objective for them was solvency and reducing indebtedness, that is, it seeks to have the maximum similarity in the amount of own capital and foreign funds, that is, they care about the financial structure of the company.


During the crisis the objectives are the survival of the company and liquidity. Studies were produced from the legal point of view with the intention that the shareholder and the investor had more information on the economic situation of the company: Financing, liquidity, solvency, profitability. We can say that state interventionism appears.

2. From the mid-1940s to the modern foundation of business finance theory.

After the war, the developments in operational research and computing applied to the company began to be studied. In the mid-1950s planning and control became important, and with them the implementation of budgets and capital and treasury controls. New methods and techniques for selecting capital investment projects led to a framework for the efficient distribution of capital within the company.

From this period is the work of Professor Erich Schneider Investment and Interest (1944), in which the methodology for the Analysis of Investments is elaborated and the Financial Decision Criteria are established that lead to the maximization of the value of the company. In his work the professor reveals an idea currently in force: an investment is defined by its current of collections and payments.

The financial manager was now charged with the total funds allocated to the assets and the distribution of capital to the individual assets based on an acceptance criterion.

Later, complex information systems applied to finance appeared, which made it possible to carry out more disciplined and profitable financial analyzes. The electronic age profoundly affected the means that companies use to carry out their banking operations, pay their bills, collect money owed to them, transfer cash, determine financial strategies, manage currency risk, etc. Valuation models were devised to be used in financial decision-making, in which the company has a wide expansion and the foundations of current finances are laid.

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In this period of prosperity, the primary objectives are profitability, growth and international diversification, compared to the solvency and liquidity objectives of the previous period. Operations research and computerization techniques will also be extended, not only for large companies.

3. Expansion and deepening of finance to this day.

From the 70’s to the present day, the studies on the science of the Company’s Financial Management have expanded and deepened considerably. Lines of research such as; Option valuation theory